Polozonomics

Does Stephen Poloz know what he’s doing? The Bank of Canada head dude shocked markets last month when he dropped the bank’s key rate a quarter point. “Insurance,” he called it. “Poison” is more like it.

The signal he sent was unmistakeable. The guy had the patina of desperation about him. Immediately the dollar plunged, and has been barely above 80 cents US since. When it happened, I told you there’d be consequences.

The nation imports $45 billion worth of stuff every month, mostly machinery and equipment, motor vehicles and parts, electronics, chemicals, electricity and durable consumer goods. Yes, plus food. And Harleys. The bulk of this comes from the US, and we’re paying 20% more than we used to.

So thank Allah for cheap oil. Without a big drop in gas and energy costs, consumers would be shanked. As it is, families are still squeezed. Thanks to Poloz, it’s just started. I mean, have you bought lettuce lately?

Despite a massive 12% drop in energy prices in January, inflation was up 1%. Core inflation (after volatile energy is stripped out) is double that, at 2.2%. That number hasn’t changed in a long time, and sits within the central bank’s own target range. It would be lower, and living would be cheaper, if our central bankers had not sacrificed the dollar. As a consequence, seven of the eight categories of stuff StatsCan tracks cost more last month. Food alone was up 4.6%. Clothing shot ahead as well, along with all the crap from China that Wal-Mart sells.

Meanwhile, if you live in the GTA or YVR, you know what that quarter point cut did to housing. As predicted, it stirred the loins of moist Millennials, sending them into the streets to start bidding wars and force prices higher – even though mortgage rates were basically unchanged. Just as Poloz had telegraphed fear to the currency markets, he fed expectations that cheaper money would mean pricier houses. And so, it came to be.

In the first two weeks of February, say the realtors, sales in Toronto jumped 14% year/year, while prices were up 10.3%. The average detached house sprinted ahead to $1,056,238, the highest in almost a year, after trending lower through the second half of 2014. A similar story happened in Vancouver. Recall the photo I showed you the other day of a near-riot to buy 300-foot micro-boxes in unbuilt suburban towers.

So that’s Polozonomics. A rate cut. Collapse of the dollar. More expensive imports. Sustained inflation. Higher living costs. Real estate speculation. More consumer debt. All at the same time our export base is falling and jobs erasing, thanks to oil. What a combination.

How would it have been worse to leave interest rates alone, let the dollar down gradually, curtail inflation and suck some air out of the housing gasbag, giving hope to those priced out?

Clearly the bank was spooked about oil and deflation, plus what’s been happening in the prime minister’s home province. As you know, Alberta real estate is cratering. January sales crashed 45% in Llyodminster, 41% in Fort Mac, 35% in Calgary and 23% in Edmonton. This month to date, Calgary deals are down 34% and average prices have dipped 4%, with the expectation the decline will deepen significantly in the coming months. Once again we see human nature at play – when listings bloat, sellers sweat and values decline, the buyers disappear. When real estate is topping out and irrational, as in YVR, there are lineups to make offers. Nothing ever changes.

What happens now?

The betting is Poloz panics and reverses course. He already signaled that in a speech this week, saying the January cut was enough. Now he can see the immediate impact of his loonie-crushing move. With inflation rekindled even as a sagging economy punishes citizens, it’s highly unlikely another cut is in the cards – at least not next Wednesday, when the next rate announcement is scheduled.

Meanwhile we all know the US Fed will be raising its rate – likely June 17th, or July 29th. If that happens on the heels of another Bank of Canada rate reduction, just imagine where our currency is headed.

Well, now, aren’t you happy you took my advice years ago to put together a balanced portfolio with lots of diversification? More US, less Canada. A whack of fixed income and REITs. Bank preferreds. Inflation-indexed bonds. No stocks, no mutuals. Lots of love and a secret sauce.

234 comments ↓

Rates will NEVER go up (here and states side) because some central banker will want that. Economies are NOT doing well. They are actually quite catatonic , running on fumes and borrowed dough.

Rates WILL actually go up (VERY much up) when Mr Market (in bonds) will force them to. And then my friend, look out.
Who’s pre positioned for that, will make 700-800 times the investment.
Japan over the next 2 years or so is the litmus test.
Anyone gutsy enough to reverse jap 3X ?
:)

Just did a calculation and saw that certain Toronto Condos yield 2.5% rent (before tax) in the absolutely best case scenarios.

Yet in the same building there are tens of similar apartments listed (for rent) right now. Last time I checked it was February. don’t believe the demand for rent is that high (at least based on the availability of rentals in that area)

As I said before. First the dude lowers the rates and then he’ll raise ‘um. That way it looks like he’s burning the midnight oil doin’ his job. Heck, maybe he wants to create inflation that only Janet Yellen could dream about, then when she pretends and increases the interest rates, Poloz can rescue us, from an avalanche of cash heading state side for better yields, by the raise’em back up… Wowza, then we’ll all get to pay higher interest rates on imported crap that cost 20% more rather than 30% more………. Bet ya’ bandit could do a better job with his paw on the ‘enter’ key. Try it out Garth and get back to us. Never first; just the best . lol TYPO, OOPS

Actually Harley’s are only about 60% manufactured in the US. Parts like brakes, shocks, wheels and electronics are all sourced globally from manufacturers who specialize in such things. But that’s no different than Ford or any other major US manufacturer. So Harley’s costs should be dropping but don’t bet on them passing that along.

Some Harley’s destined for foreign markets are built at their plant in India. That’s right, they have a plant in India.

I heard the Honda Gold Wing is manufactured in the US and actually has a higher ratio of US built components than a Harley does. How patriotic is that?

Toyota also builds cars in the US.

These days almost all major manufacturers have a global supply chain and cannot make their products competitively without it.

Even the lofty iPhone with it’s “Designed in California, made in China” stamp has a global supply chain with many of the parts coming from other places in Asia and I think the glass is actually made in the US and sent to China for inclusion in the phone, and then sent back.

So the net effect of all these currency gyrations is going to be difficult to add up. But one thing is for sure, companies that have the majority of their components manufactured in the US (like John Deere or Caterpillar) are going to be increasingly hard pressed to be competitive in global markets. Heck even in their own.

It should be good for whatever is left of the Canadian auto manufacturing industry though. What models there are that are still assembled here should be a lot cheaper for US consumers than the Toyota’s being made in the US.

We buy oil in USD and it is sold on CAD. Gas here was 81.9 pre poloz and his rate cut and then it bounced to over $1.00 post rate cut. I guess the Feds and provinces still get their taxes and we the common folk get screwed. Even Alberta is expecting a surplus. Housing crash is just delayed and we will all be poorer supporting this ailing gas bag.

The Central bankers have almost zero credibility. Smoke. Mirrors. Extend. Pretend. Send Poloz a case of Bandit’s favourite flavours and tell Mr. P that’s what we’re all gonna be eating, shortly. What the big P needs is some short leash training. Go for it Garth. Heel.

Oh and another example of the extreme complexities of modern manufacturing. Many current NASA rockets are powered buy rocket motors built in, guess where? Russia. Russia has a closed loop motor design that eluded American designers which is more efficient, meaning less fuel is needed and thus less weight which in rocketry is everything. The sanctions against Russia are causing a bit of a problem for NASA.

Another example of globalization that includes Russia: the space station. yes, it’s still up there even though it doesn’t make the news so much anymore. That’s because ever since the end of the space shuttle program the Russians are the only ones on earth who can get there. They transport all the astronauts back and forth on 60’s derived Soyuz space capsules and much more modern rockets. The US isn’t scheduled to be able to get to the space station for another few years, and when they do, guess where the rocket motor is supposed to come from?

So thank Allah for cheap oil. Without a big drop in gas and energy costs, consumers would be shanked. As it is, families are still squeezed. Thanks to Poloz, it’s just started. I mean, have you bought lettuce lately?” -garth

I am reading this, and just don’t understand “what jobs” these people have in Vancouver and Toronto to buy these homes? Even with low interest rates, 1 million is a lot of money. I was in South Surrey/White Rock last week looking at private schools for my kids and there were 4 families either being interviewed or waiting to be interviewed with their parents, all speaking Chinese. These home buyers outside of Vancouver don’t seem to be “earning” their money in Canada.

Poloz looks like a moron to me with that baby face look..
And so does harper with all that terrorism talk.
If you’d fart loud enough they both would run and hide in janitors room no doubt.
This country is finished.

At least Poloz is 100% Canada’s error. We have Janet (not quite Jellin’) Yellen as our stooge. While she is super dovish, whom I believe will NEVER raise rates. I sure hope I am wrong there, I could appreciate a cool down in the stock market, and a normalization of rates (to say 3% or so) on short term rates. Balance my balanced portfolio a bit better for security of fixed return items.
Sure, it would goose up mortgage rates, and borrowing costs, but what red blooded American moron needs MORE DEBT? They aren’t quite as goofy as the neighbors north of the 49th, but are still prone to live beyond their means.
Don’t believe me? Look at how many Boomers are on track for a prosperous retirement in the U.S. – not many.
Social Security here pays on average about $1200 a month. Do YOU think you will have a ‘prosperous’ retirement on say $24,000 grand a year? NOT!!!
Amazing to me that basic math skills atrophy so much as boomers get wrinkly, and begin to leak.
A bit of prior planning, and no debts at retirement, can more than double that dismal average. If you are 40 you still have time to change the math, 50 it will be harder, 60 you are a baked turkey – enjoy your poverty stricken ‘golden years.’
This is not a warning, just the reality of negligence.

I’ve always said that lettuce is nothing but a means of getting that yummy salad dressing to your mouth.

But regardless Garth’s point is valid, California and Florida are the fruit baskets of North America, especially in the winter, and so if you want an avocado you are going to have to pay more for it. You’d think that would mean less demand for avocados and thus the prices would balance out, but that doesn’t seem to be happening and if it did it might probably squeeze growers who might then reduce supply. It’s all very complicated.

The rate cut seemed to help the realtors in my neighbourhood (Pt Grey, YVR). All of the houses within 3 blocks of me have finally sold within the last couple of weeks. One had been for sale for a year and a half, a couple of others for almost that long. My guess for the sudden change is the 20% discount on Canuck bucks (the ones I am aware of were sold to non-residents). The house across the street has been empty except for a few months at a time for 15 years, always owned by people overseas. It had been listed for 4.7M.

Monthly price levels for Greater Victoria have been plotted on this chart, dating back to November of 2013. Based on Brookfield’s stats:

* House prices across Greater Victoria were lower in January compared to December.
* Prices have fallen in 5 consecutive months.
* Prices were 1.74% lower than a year earlier.
* Prices in January had fallen 11.4% from Victoria’s peak month (June 2010).

The local real estate board’s average and median price stats for detached houses across Greater Victoria support Brookfield’s numbers. In January:

* The average price of detached houses fell 1.4% compared to a year earlier (3-month average).
* The median price of detached houses fell 2.0% compared to January 2014 (3-month median).

Everyday oil is under $60 spells economic ruin for Alberta…. Under $50 like it is now and we’ll Alberta becomes the next detroit in a few year with RE worth no more then $50k. To think after just four months of low oil prices Alberta is in a world of financial hurt will all that oil money gone all thanks to the steal steal steal waste waste waste CONservatives. To think socialist Norway with high union rates and high union paying jobs still managed to save $830,000,000,000.00 or $830 billion dollars for those in Alberta who are weak minded to understand numbers. Alberta is a shining example of how conservatives are the most crooked party but the people of Alberta are not the sharpest pencils in the box. Good Job voting CON and you will pay dearly for it. Alberta is FINISHED

Bread is also a great way to get salad dressing to your mouth, especially vinegarette. Probably has a lot more nutrients than lettuce as well.

Lettuce is, well, useless. The only use I can find for it is to hold all the mayonnaise that makes a Big Mac so yummy. Oh and it makes a good ecoli transmission mechanism. I don’t even know why they grow the stuff it isn’t food for people. Although I do enjoy a Caesar salad. Yum, get that dressing and those bacon bits to my mouth. Yum.

Canada’s housing bubble is much larger than the 2006 US housing bubble. A quick look at house prices in several US cities gives us an idea of how extremely overvalued housing markets across Canada are (including Victoria, of course).

Girls and guys, there is simply no good reason at all to buy a property right now in Victoria’s underperforming, weak and declining housing market. If historically-low (emergency level) interest rates can’t stop Victoria’s price decline, what will?

Renting for now for less money than it would cost you to make the payments on a similar property is the financially safe choice for you and your family. Taking on a massive, dangerous mortgage on a bubbly property that consistently loses value year after year is a recipe for financial disaster. Just ask our American friends.

If granite and hardwood makes your hormones roar you can still enjoy those features right now by renting (risk-free and worry-free) until house prices make more sense when compared to rents and incomes.

Those of you who have held off from buying a property in Victoria’s bubbly (and declining) housing market for the last 1 to 4 years are probably very happy with your decision.

Alberta has survived a lot worse than this. The cycle has always been boom-bust in the oil patch. It will be rough for a couple of years though. I don’t think they will be selling too may new RV’s or boats this year.

Garth your pissed at Poloz because he screwed with your prediction for higher interest rates.

I agree with your recommendations for the past few years of balanced portfolio and steer clear of RE investments = but with RE if you plan to hold for long time and have a 20% down payment I still think it can be a smart move/

Couple of strecthed truth in your post today.

1. When Poloz dropped rates the Cdn looney was already NOT worth a looney. Somewhere lower than 0.90.

2. Electricity Imports cost more? not last time I looked – all provinces except maybe Alberta normally export so their take should be higher.

And the Fed is getting cold feet because higher rates mean higher US$ and that is not good with trading situation and impact on fragile Job growth.

Get used to it rates are staying low for a while yet.

Alberta be dammed oil will stay lower for a while yet as well and we have seen this theme before – we have along way to go before the looney hits low 60’s again the last time that happened no one went hungry or dispair hit here in Canada….

Naga

I did not predict higher Canadian rates, but expected no change. As for power, I said (correctly) it is a major import and inject to forex pricing. — Garth

I am reading this, and just don’t understand “what jobs” these people have in Vancouver and Toronto to buy these homes? Even with low interest rates, 1 million is a lot of money. I was in South Surrey/White Rock last week looking at private schools for my kids and there were 4 families either being interviewed or waiting to be interviewed with their parents, all speaking Chinese. These home buyers outside of Vancouver don’t seem to be “earning” their money in Canada.

Canadians speak ‘Chinese’, too. — Garth
……………………………

Garth, with respect, of course Canadians speak Chinese. They are Canadians with Chinese heritage. I don’t believe anyone is disputing that. The issue seems to be the perception that a lot of foreign-made money is swamping the 604 (or 416). Geeez, talk to Canadians of Chinese descent (I have loads of friends in this category) and they aren’t thrilled with the foreign-made rich as well! I get it…if everyone buying houses here was rich, there’d be no reason for all these huge mortgages.

Which comes back to #30 Alison’s point. What kinds of jobs are these people doing to be able to afford these places?

My feeling is that it’s probably 2 incomes stretched to the max. Is it not true that qualifying is on gross income?? My mortgage broker friend says after taxes are paid and all other costs are factored in, the amount of net income eaten by house buying is more accurately 60-65%. I feel that even that number might be conservative.

As for energy savings…. I call BULLS#!%. Gas today 123.9/l in Van. Don’t even get me started on grocery bills.

When nothing makes sense look at the agenda. If you think that western governments are democratic and serving the people than you to need to put the kool aid down and take a look at the big picture.

Agenda 21 folks. Its not hard to connect the dots as it is very clear what the final agenda is. Open your eyes and look around as evidence is everywhere and it is not by chance. People are being removed from rural areas and driven into 300 sq ft boxes in the sky, all part of the plan, it just so happens hipsters are dummed down enough to bid them up.

The plan is no middle class. Only elites and surfs. Chaos and a perpetual war with a fictitious enemy. Terror. Even the folks doing ok today will soon be sadly disappointed as tommorrow’s yesterday they laughed at the warnings, but the writting is on the wall.

Truth is truth even if nobody believes it

A lie is a lie even if everybody believes it

I encourage everyone to educate themselves on what is really going on, because what the masses are sleepwalking into is not pleasent

“We will know when our disinformation is complete when everything the American Public believes is false”

Yes, I am happy. I always put my Freedom First. Having cash, cash flow, liquidity, balance, diversity, and being debt free at all times are how I operate. Health is wealth. I won’t even consider putting myself in stressful financial situations, it is bad for my well being/quality of life. Home for me is where I live either owning or renting, period. Renting is a steal right now, as when I have bought houses, they were a steal at that time. I go by financial principles and I am a numbers man. The emotions of the “wants”, “ego”, “fear”, or “greed” must be removed from the thought process of emotional human beings if they wish to achieve Financial Freedom. No exception.

Astonishing incompetence of the governor of BOC and of the financial minister.

Unfortunately we have major crisis brewing, the time for action was in 2006-2007.

Expect the dollar to tank and as there is nothing BOC can do (they can’t touch interest rates) the savers could be wiped out. we don’t need hyperinflation, losing 70-80 % of purchasing value of the currency in a regime of fixed income and no government safety net is sufficient.

See why I’m no longer elected? – Hon. GT
Yes Garth I can see why. If Poloz -had- raised interest rates, what would have happened to the housing market? The political party that presides over any sort of house-a-geddon will find itself out of office for the next generation !

#42 Crowdsourcing Garth on 02.26.15 at 8:41 pm asked:I get it, Garth makes a living off this, he kindly and generously drops the sketch on the napkin, not the blueprint.

Still… could someone please translate Garth’s secret sauce into tickers for a newbie follower of the cult?

Highly appreciated.

Garth has previously given us a recipe for his secret sauce. Not that long ago either. However he doesn’t like repeating himself any more than he has to, so you’ll have to look through the back-numbers to find the various times he’s gone into more detail. You can use The GarthFAQ’s topic list to give you some pointers.

“Now, with these production fundamentals in place,
rapidly growing amounts of crude in storage, and
longer-term prices capped way below multi-year
averages, why are energy firms’ shares still relatively expensive? For example, over the past couple of years spot crude oil is down 45%, while the energy component of the S&P500 is up 2%.And forward P/E ratios are more than double the historical averages -these are some of the most expensive large cap shares in the market.”

My spouse’s mum speaks very little English and father’s English is so heavily accented it is hard to believe he is not speaking Cantonese. They have 5 kids – three doctors and two pharmacists – all of whom pay taxes and contribute to making other Canadians lives healthy and happy. Our healthcare system is lucky my in-laws chose Canada.

With few exceptions, someone in all our families started as immigrants.

Actually Garth, we are not “paying 20% more than we used to” on US imports. The weak US economy has resulted in US firms having very little pricing power, and very little ability to pass on price increases to Canadian consumers. This is why inflation in Canada is practically non-existent and the US is in outright deflation. Far from a strong economy in the US and Canada, the economy is exceptionally weak and in need of a substantial amount of stimulus lest the yield curve invert itself too badly and a liquidity crisis precipitates.

I personally believe Poloz is finally on the right track in terms of lowering policy rates, and believe that the policy rate will again be lowered come next week. The BoC remains “behind the curve” however in recognizing and dealing with the danger and high likelihood of deflation. Falling RE prices are attenuating consumer demand quite considerably in Canada as we’ve seen in the numbers lately. However, the interpretation by the media of his comments is rather bizarre as of late. And bond traders have gone just full-out schizo listening to the sort of spin being applied by the media hypsters.

If Poloz -had- raised interest rates, what would have happened to the housing market?

Raising rates likely would have precipitated a liquidity crisis in time as the yield curve was inverting. And the housing bubble was popped by the late Flaherty almost 2 years ago with the Budget 2013 changes to CMHC subprime mortgage insurance, so the blood wouldn’t be on Poloz’s hands if he did that.

Raging debate on talk radio, some pc guy said he beilived in creation theory, when he was chirping the new sex Ed curriculum. As you all know I’m a raving atheist. However truth is no one has the goods on how we got here.

We’ve been trained by a curriculum that instills a belief that, we should not question anything from someone who has obtained an memorize, regurgitate, obidance certificate. Some say we came from rats. Another Rediculos concept. But the scenice is settled, move along, nothing to question here.

I have theory, Aliens land us here 20 thousand years ago. Our ancestors were probably bad ass criminals, war mongers, killers and generally pricks. We haven’t changed much either.

The Brits did that to some of theirs, hey that’s how Australia was founded.

Thought out history, in caves, paintings, art work drawn out by ancient people.

Little flying saucers.

My moneys on that one. And it’s just as valid as any of the others.

As far as the new sex Ed curriculum is concerned, designed to make kids less hostile to homo sensuality, I have no problem with this.

We will only evolve and become better people, when we stop hating on another.

Only then will be equipped and worthy to fly to the stars. The UCC told me so.

“They have 5 kids – three doctors and two pharmacists – all of whom pay taxes and contribute to making other Canadians lives healthy and happy. Our healthcare system is lucky my in-laws chose Canada.”

Born and raised Canadian kids could have been trained for those jobs, so don’t get too full of yourself. And doctors and pharmacists mostly are public servants, rather than net taxpayers. With most of their compensation derived from payments from government.

A few years back I was sitting in my aunt and uncles back yard in west-end Dampcouver. She was persuaded that the neighbours on either side, chinese, who had knocked down the houses they bought to build monsters houses were millionaires from the mainland. “Auntie, they have big mortgages, and some bullshit income on the mainland that nobody can check out. Otherwise they’d build somewhere nice.”

“Well, now, aren’t you happy you took my advice years ago…” — Garth saved my finances but has doomed my liver. I was coming off a ten year bender in Latin America when I found this blog. Made, and mercifully saved, a lot of money, although lost a lot of brain cells along the way. Fair trade all things considered. Anyway, when I made my way back to Canada I was clueless as to what to do with money. Now I’m making 7.8% or so a year off my debauched decade away and will soon retire back where I left off. All because of this blog. I’m screwed but long live balance and diversification.

“The nation imports $45 billion worth of stuff every month, mostly machinery and equipment, motor vehicles and parts, electronics, chemicals, electricity and durable consumer goods. Yes, plus food. And Harleys. The bulk of this comes from the US, and we’re paying 20% more than we used to”.

Garth has previously given us a recipe for his secret sauce. Not that long ago either. However he doesn’t like repeating himself any more than he has to, so you’ll have to look through the back-numbers to find the various times he’s gone into more detail. You can use The GarthFAQ’s topic list to give you some pointers.

Here’s a couple of mentions to get you started.

5 October 2014 – From scratch
21 November 2014 – Trust

But there’s plenty more valuable information in the archives. You have a lot of reading ahead of you…

—-

Thank you Derek! The FAQ is awesome.

I will do the reading on the weekend and I will try to put together a balanced registered ETF portfolio for $100K. It will be strange, I never invested a cent in indexes, fixed income or REITs.

I like more aggressive growth, have appetite for risk in exchange for higher potential return, I wonder if a 30/70 allocation would count as heresy.

@#45 Garth favors US equities. He makes a good case for it. The decision is how comfortable are you with risk.

He hasn’t, as far as i know, published a portfolio plan but it is something like 20%VUN, 20%VCN, 20%XEF for equities, 20%VAB and 20% CPD.

It gives you global exposure, anchored by some nice fixed income. CPD is preferred shares and right now they’re in the gutter. Are they a buy right now when they’re susceptible to interest rate increases? I’m no expert.

I did take Garth’s advice and skew my portfolio towards US equities. I’ve seen nice increases in value, but it’s just the dollar sinking.

#27
Many current NASA rockets are powered buy rocket motors built in, guess where? Russia. Russia has a closed loop motor design that eluded American designers which is more efficient, meaning less fuel is needed and thus less weight which in rocketry is everything.
———————–
So if NASA buys rockets from Russia no one can Reverse engineer it ?? Really ?

Add to the exchange rate issue drought in the midwest (you know, where most of North American’s produce is grown), and you have hard times ahead for Canadians on fixed income. Given that most don’t have 2k in savings, extra food costs are going to hurt.

Manufacturing is a shadow of what it used to be. Half the exports you mention survive only because of subsidies that distort market conditions and serve special interests over the interests of the taxpayer as a whole.

Even worse is the continuing automation of many jobs. Have you seen the sorts of robots that are starting to appear in greenhouses, for instance? Robot trucks for the oilsands were already under development, robots are heavily used in Asia for electronics and vehicles.

There seems to be no end to this insanity. A house on my street in Mississauga just sold for $960 ($40k over asking) When we moved here 7 years ago my street was was selling for mid $400’s.
I don’t know what can stop this train

Very happy to see this examination of our currency and the big hit to my future shopping as a result of the plunge of the loonie.

Janet Yellen, Federal Reserve Chairwoman gave testimony this week and it was televised and on the net. There was concern mentioned about CURRENCY MANIPULATION..but I am unsure if our dear Garth would go there. Poloz is a wonk foremost and not really the type to pull a 94 tequila peso crisis.

My only real big ticket items are my Sketchers sneakers which are $50 U.S a pair so I will buy last year’s style at half price. Of course, most of my medications are from American suppliers so OHIP and also the insurance plans will be paying up so that might mean I don’t get the meds required. Oh well nobody said being a Canadian was going to be a walk in the snow. My favourite blog is reasonable. Thank-you.

Canada has been built on the backs of hard working immigrants who have generously decided to bring their knowledge and trade to grow this country. In so doing, they have also reaped the rewards of raising their families in a safe and wonderful country. I am born and raised in Canada and I translated for my family as soon as I learned to speak. Proud of it, and proud of them for being brave enough to forge ahead in a new country. Immigrants built this country, and if new immigrants want to bring their cash to invest in Canada then that might in fact save us all…. Welcome them and their money I say..

Re #12 JG Don’t forget the bank exchange service fees . They add a 2.5% fee onto the $1.25 so an 80¢ dollar mean it costs $1.28125 to purchase a George Washington at the bank. Now for some real comedy , airport exchange rates. Well we won’t even go there.

Remember that 50 year old, run down bung I was selling in the big smoke?

I hired a cardboard cutout of a realtor and the shack sold on the first bidding war weekend. Half a dozen offers and sold almost 20% above list. All offers were ‘cash’ and all contingencies were scratched out. All closes were between 20 and 30 days. Ridiculous.

Beyond my expectations. Hog town real estate is alive and well baby. I’m looking forward to having another $580k in my pocket in March. Time to party hearty!

Born and raised Canadian kids could have been trained for those jobs, so don’t get too full of yourself. And doctors and pharmacists mostly are public servants, rather than net taxpayers. With most of their compensation derived from payments from government.

Wow.

Just wow.

I never realized that calling Mark an idiot would turn out to be a compliment.

Yeah, lettuce is kind of overrated. And sometimes buying lettuce feels like a game of Listeria Roulette. Kale still sells for $1 a bunch on a good sale day, but I have a feeling I’ve been getting less and less over the past 2 years.

“They have 5 kids – three doctors and two pharmacists – all of whom pay taxes and contribute to making other Canadians lives healthy and happy. Our healthcare system is lucky my in-laws chose Canada.”

Born and raised Canadian kids could have been trained for those jobs, so don’t get too full of yourself. And doctors and pharmacists mostly are public servants, rather than net taxpayers. With most of their compensation derived from payments from government.

That was cruel and gratuitous. Time you left this blog. — Garth

============

No shit. Mark, where the hell did that come from? Unless you’re 100% First Nations. No, wait, that would still be cruel if you were.

Interesting chart here of lumber futures. The guy (from the states I assume) says, “Longer dated lumber futures (Sep-2015) have turned decisively lower. Markets seem to be anticipating soft construction demand this summer. Note that some of this may be driven by the housing market in Canada, which is about to undergo a correction.”

To Derek: Good job giving some pointers to #81 Crowdsourcing Garth. Way to help a newbie onto the ladder of success!

To: #81 Crowdsourcing Garth: I still feel like a newbie 1.5 years in but, boy, is it ever satisfying to watch my net worth climb every month and to see the diversification work its magic during market hiccups!

And to all those out there who, like my husband and I, make under $40K each but are managing to max out our TFSAs anyway – AWESOME!!!

Good day Garth:
From what I understand, lowering the value of the loony makes Canadian goods more attractive on foreign markets. That is only temporary because other countries devalue their currencies to compete. A race to the bottom.

It would be helpful to have a stable currency for the world to trade with. Possibly the SDR?

As much as people see fault with the American economy, it is still the strongest economy in a world filled with instability. Basically the cleanest dirty shirt!

Having said that, commodities such as oil, steel, copper prices are way down compared to a year ago. That means that there is a world wide economic slow down.

The ripple effect will eventually hit Toronto and Vancouver as well. Governments and central banks have tried to master the market but the market always wins. Interest rates is only a band aid for a wound that requires reconstructive surgery.

RE: #70 Mark on 02.26.15 at 9:56 pm
And doctors and pharmacists mostly are public servants, rather than net taxpayers. With most of their compensation derived from payments from government.

What an asinine comment! The patient (taxpayer) pays no matter how you look at it.
Really no difference between these two scenarios except profits:
Patient–>Private insurer(via premiums)–>Doctor
Patient–>Public insurer(via taxes etc)–>Doctor

Opportunity abounds. Thank you for being a reasonable voice and providing context. It is exhausting reading the worst offal of humanity spewing their guts out everyday on cbc.ca and other places, complaining about banks, taxes, stephen harper, the ontario liberals, immigrants, muslims, hijabs, house prices, the 1% who takes all the wealth, the 1% they earn in their savings account, and they dont see the connection between the two…

So much cynicism and fear. And none of these vitriolic armchair quarterback ignoramuses understand anything about finance, banking, or economics, they just think its a good use of their time to complain and write stupid ignorant bullshit on news sites who just degrade the whole public dialogue by even offering these comment sections…god forbid any of these people do something productive to improve their lives.

Thankfully comments here are enlightining and entertaining for the most part. I giess greaterfool readership iq is several thousand percent of that of cbc.ca

YVR mkt topping out. Garth is right. Lots of speckers and builders. Lots of builders bringing in friends to “crowd fund.” This is not a healthy market. Stupidity everywhere. Stop using immigrants as scape goats. We did this through low rates, lax lending, and speculation. We are the herd.

Hey what’s the CREA down low on a 21 meter tunnel in Toronto, centrally located on a treed lot with a great view of, well, nothing at all, just roots? The down payment seems to have been pretty reasonable and the payments easily attainable – lots of sweat equity though. Seems to be a situation at the front of the housing solutions, eh?

Garth, some time ago (early 2013) you said sell Canada and buy USA, which was a great advice. At that time rate was about 1 buck CAD for 1 buck USD. US stock market (dow) was about 13500. Today our rates are 0.80 CAD = 1 USD and stock market (dow) is about 18000.

Wouldn’t it be the time to sell USA to buy Canada (or Europe) or something ?

First they may have been born here as I was of immigrant Italians / Norwegians. But even so – thank God (which is ironic since I, too, am a raging atheist) the meritocracy still works to some small degree. There is no inherent right to jobs for the privileged who are born here.

Frankly, immigrants in any country are the new blood who help remind all of us why it’s so great to live here (any adoptive country). And that should motivate us to get up a little earlier and work a little harder too!

I think we should continue bringing in more immigrants (from any country) as long as they are ambitious. Let them remind us not to take our affluence for granted.

The Fed has increased the money supply by $3.1 trillion.They have $17.5 trillion of debt.They have $127 trillion of unfunded liabilities like Medicare, Medicaid, Social Security, student loans, Fannie Mae, Freddie Mac, FHA. 50 million Americans are on food stamps.

You can print all the money you want, but if people are not borrowing it, if they’re not spending it, then your economy is collapsing. Those fat yanks are an unsure bet friends.

#70 Mark on 02.26.15 at 9:56 pm
Born and raised Canadian kids could have been trained for those jobs, so don’t get too full of yourself. And doctors and pharmacists mostly are public servants, rather than net taxpayers. With most of their compensation derived from payments from government.
====================

How do you know they weren’t born or at least raised here? It is extremely difficult for foreign trained doctors to qualify to practice here, even those from G8 countries. The chances that five siblings trained in medicine in China would all be practicing in Canada is slim. Also do you realize that many Canadians can’t find a GP and if they could, they wouldn’t give a damn where he/she came from or if they are paid by the government.

However I am sure these Canadian physicians would be glad to find someone to help you manage your Aspergers syndrome.

Higher interest rates ensure insolvency in countless places across the globe. Government, corporate, and household debt has risen from already high levels in 2008/9 to even high multiples today.

Interest rate tightening cycles, if attempted will be more destructive today than they were in 2005-2007 simply because the total debt numbers are worse.

Knowing politicians, it is doubtful that any tightening cycle will last long, given the deleveraing, defaults, deflation and restructuring it would bring.

We saw in a matter of months in late 2008 how quickly Stephane Dion, the NDP and Bloc coalition was ready to use usurp government control to bring in “economic stimulus” and massive government spending.

Our supposedley fiscally conservative government quickly gave into the pressure by the spring and whipsawed us from a $14 billion surplus to $50 billion deficit.

You are much more likely to see governments and central banks pull out all the stops to keep interest rates down as low as possible for as long as possible. ie. a continuation of the last 6 years (QE, NIRP, ZIRP, OMT).

Taken to it’s logical extreme this becomes complete currency destruction and hyperinflation. The weakest links like Ukraine and Venezuela fall first.

This could be prevented by enduring the re-adjustment period and recession by liquidating the debt. Or restoring a gold based monetary system will a dramatically higher, re-valued price of gold.

The Americans are very familiar with the technology at this point or they wouldn’t be using it but why spend billions tooling up a factory to make your own if you don’t have to? I suppose if they had no choice they would. And then maybe the Russians would have to start making their own Fords. And the Chinese their own iPhones. Oh wait…

Anyway there is a strange logic of economies of scale to globalization and that was my point, not that the Americans couldn’t make a rocket engine at this point if they wanted to. The point is why would you if there is already a perfectly good one on the market? Same as why Harley doesn’t make their own wheels.

I concur Allison. Garth and politicians please see what unregulated “globalization” with no hedged benefits to those of Canadian heritage is doing to this country.

Education: Children born and raised in Canada in a public school system cannot compete with children who have had primary/elementary school education out of country. Different standards which lead to realized success for those educated out-of-country and success for only the top few of children succeeding for those educated in-country. (Teachers, you know exactly what I am talking about). No scholarships for your children Mothers/Fathers. The scholarships go to the “new immigrants” of children who’s bulk of education occurred out of country and know the exorbitant grade it takes to make it in to a local university. Very few Canadian born children can compete. Universities cater to the “international student”. More money for the university. Better “appearance” of academic standards for those that succeed as marks are better for those that have received an education outside of Canada. Those who have contributed to the taxes for decades: Your education tax dollars now go to fund “new immigrant” students rather than home grown.

Wages: better find a job outside of Canada if you ever hope to own a home in Vancouver or Toronto. Can’t afford one if your money was earned inside Canada unless you are a CEO of some sort. Not even the MD’s can purchase anymore.

Government policies have led to severe inequities for families who have paid taxes for decades to build this country from the ground up. We are in a very sad state of affairs.
I think I’ll rename this the The Greater Butthole Blog. — Garth

Oh and out-sourcing doesn’t always even have to be global. I have an old style Cherokee (99, but they started production in the early 80’s – it had quite a run and for good reason). My understanding is the axles are Chevy S-10 and always have been. I believe they also outsourced the transmission. And all the electronics of course, just like everybody. American Motors couldn’t put the whole Cherokee together on their own at the time so they focused on the body and the absolutely amazing (for it’s time) in-line 6. Probably the best motor AM ever designed but I bet the fuel injectors came from Germany, and the computer from Japan. I did the brakes on it myself a few years back (rotors were warped the previous owner had tried to haul a horse trailer with it with no trailer brakes) and the new rotors were $25 each and made in China. Why is China building new brake parts for such an old vehicle? Oh ya Jeep built the Cherokee in China for foreign markets. Probably always had Chinese rotors.

Lower-than-a-snake-in-the-grass interest rates have NOT caused GDP to cheerfully rocket heavenwards anywhere in the capitalist democratic West. But this “financial repression” has shot the SPX, for example, to the moon and beyond.

The BoC rate is, technically, the average yield achieved at an auction of sovereign bonds where the bidders are primary dealers (by invitation) as well as the BoC itself.

Does it really matter WHO the BoC governor is?

Monetary policy is a class phenomenon.

The Canadian establishment hasn’t lifted a finger to rein in our run-amok banksters realturds and presstitutes. And couldn’t care less about the price of lettuce, bacon, or bread . . .

The #2 motive of monetary policy is to keep the ruling party in power, the 1st is to preserve the social status quo.

I myself think that Canada has already slipped into Recession, that the Canadian unemployment rate will rise dramatically, that the US Recovery is too slow, uneven and weak to make a difference – and that central bankers everywhere in NA and Europe have already lost their reputation as capable captains of the economic ship.

Thx for finally speaking out on the Poloz debacle. Industry heads and commentators have been howling but the media doesn’t report.

Poloz is a maniac at the helm out to smash the expectations of Canadians while draining their savings in a rapidly inflating consumer market. Polozonomics are the worst case scenario for everyone.

Poloz is uneducated in finance and economics ..zero background in either. We beg PM Harper to reverse his decision to appoint this loyal bureaucrat and send Poloz back to what he knows…..the dark rooms of NFLD. His 1940’s plan for Canada simply can’t work. Canada is no longer a country with 80 of the population in the fields.

No one is selling rocks and trees into a global economy that is flat…and no one is buying no matter what the value or (devalue) of the local currency. You can’t sell hard commodities if no one is buying Mr Poloz!!! Right now we can’t give the stuff away. So stop bashing the dollar and starving our seniors on a fixed income.

“Half the exports you mention survive only because of subsidies that distort market conditions and serve special interests over the interests of the taxpayer as a whole”.

That’s simply not true. Very few Canadian industries receive any form of Government support. If anything, Government paperwork is crushing them. Programs that were designed to support the efforts of small businesses to modernize and grow like SR&ED ( Scientific Research and Experimental Development federal tax credit ) turned into a feeding frenzy for consultants and lawyers. Very little R&D money ended up in the right hands and and it accomplished very little.

The big payouts to GM, Bombardier and Linamar have offered very little to the supply chain.

Most of these expansions were approved long before the Government entered into the picture. In many cases, the Government money wasn’t necessary at all.

We’re not the USA …… We don’t have a massive industrial welfare subsidy program called the US military. That kind/size of intervention really does distorts markets.

Canada does have a business welfare program .. but it’s mostly things like single bidder contracts. Government land sales to campaign donors at prices far below market values. Re-zoning to benefit developers. You know, classic corruption.

Manufacturing is a shadow of itself because of our ridiculous past reliance on one major customer, the USA and its corporate branch plants in Canada. Diversity is as important in exports as we have seen in investments. We put all our eggs in one basket and we didn’t even own the hens.

Now our turkeys have come home to roost.

Canada really is the World’s richest underdeveloped country. We were warned by people like James Laxer, Kari Polanyi Levitt and Mel Watkins in the 70’s that this would happen and that our recovery would be slow and painful when it did.

We need to learn the lesson of SR&ED and develop programs with real outcomes. Maybe we need to invest more in research and development at the University level and less at pocket stuffing level. Undergrads are motivated workers and they don’t cost much, in fact … they are willing to pay to be there.

Must be nice to have a job like Poloz has, that pays a few hundred grand a year just to pick a number. This month 1%, next month, either .75% or 1.25%. Gee, can I get a job like that?

And he chose the wrong number! I agree with Garth 100%. The best thing for the Canadian economy right now would be an interest rate increase of about 1/2 %. That would cool the real estate market in overheated places like TO and Vancity. It would encourage savers, increase the value of the canuck-buck, make imports cheaper – all the things Garth listed. But no, Poloz screwed up what should have been a very simple decision.

These countries are wanting to make up the shortfall in reveue by borrowing……but you know what happens when too many people rush through a narrow window when the house is on fire? Some don’t get out alive.

Countries like Nigeria and Venezuela are already showing collateral damage. Angola is failing. 90++ countries rely on oil revenue. Obama has attempted to bully Russia, Canada and Iran into begging his forgiveness. With 22 months left in office no one is blinking….yet Obama is p repared to watch billions burn and starve while he palys his ‘legacy games’.

Corrently producers aren’t selling…they’re storing. The shut down of rigs and wells doesn’t cost ‘big oil’ a dime…in fact they profit from lower production costs…making low priced stocks a super bargain. When supply runs out……it takes time to get supply into production again….and it looks more likely that oil will hit $200 p/b as we get closer to Obamas very welcome exit.

I’m playing the long game and dripping all my oil stocks….preserving cash…..for the timing of the melt up in energy pricing.

#80 The real Kip on 02.26.15 at 10:17 pm
“Food alone was up 4.6%. Clothing shot ahead as well, along with all
the crap from China that Wal-Mart sells.”
I love Wal-Mart.

——–

Canada withdrew General Preferential Tariff (GPT) for China on Jan 1, 2015 so prices on imports increased. As well, most imports are bought in US dollars. I believe US importers still get the GPT (or equivalent) with China. Some Canadian importers are moving to place orders with Viet Nam factories.http://www.cbsa-asfc.gc.ca/publications/cn-ad/cn14-019-eng.html

So your mixed portfolio that you keep advising people to invest in is rising 7% per year, but houses in Toronto are rising 10.3% per year? And you can massively leverage your investment in a house, placing only 10% down and borrowing the rest, something you cannot do when you buy financial investments.

(“sales in Toronto jumped 14% year/year, while prices were up 10.3%.”)

Sounds to me like investing in a house is a much better choice than investing in stocks/bonds/etc, that is if such a rate of return can be duplicated year-after-year, don’t you agree?

#100 hohoho — <i?"over the long run, as society and technology evolves, people can do more things better. so why should the fruits of your past labour hold the same value??"

I was thinking of saying that if the original poster was angry that cash loses value to inflation, but didn’t trade the cash for something that didn’t, then the original poster was a little bit stupid. But your answer is even better.

My father came to Canada as a stateless refugee, with next to no money. He was also illiterate. He was able to sign his name, but he never drove the 401 because he couldn’t make out the signage fast enough not to miss an exit. He was profoundly ashamed of his illiteracy, hid it very well, he was afraid of education.
Initially he worked with a landscaping crew in Toronto, then in a mine in Sudbury. Things started lookin’ up for him when a friend got him a job in a Canada Packers slaughterhouse. After he brought me and my mother over, he bought a farm, and got a job nearby at an Abitibi plant.
The farm had no electricity. For two years we lived in the 19th century. I have a nice collection of kerosene lamps. My mother was the toughest woman I’ve ever known.
When he was dying in a hospital in Owen Sound (wintry end of the earth) I had my son come down from, yes, Harvard, to say good-bye. Dad was watching a football game – “You no play zis stoopit footboll. You promiss me you no play footboll!” Jr: “I promise, Opa.”
The only charity to which my late wife devoted her time was The Literacy Group.

[I doubt that MARK is a racist or xenophobe – he just likes to argue. As for SMOKING MAN’s spelling – it’s delightful.]

You’re right Garth lowering rates was absolutely a dump decision. It felt like panic then, it’s becoming more obvious now.

Deflation is not happening, at least not in North-America. In Canada the drop of the loony alone insures that.

Anyways dropping rates in a debt binge environment such as this was really stupid. Credit was already over-abundant and cheap, there was absolutely no need for this move. The CAD was already dropping like a stone, no need to make that situation more dramatic either.

The smartest thing the BoC can do right now is just wait for the FED to make the first move and follow it slowly when the time come. We have let this household debt binge happen for too long, yes the BoC should have raised a long time ago, but it didn’t and now we have very little room for manoeuver, that’s a fact, live with it and hope the storm won’t be a «perfect storm».

Poloz panicking and reversing course might save his own skin in the long game, but that assumes he cares about his own long term career. If he was put there by Harper, he would be deluded to think of himself as an expert. He should bow to his leader and do whatever keeps them in power. His own personal well being will benefit most from that.

So assuming Poloz doesn’t understand or care about the long term viability of Canada, and assuming that his strings are being pulled by the Conservative party, what kind of policy would be most likely to win Conservative seats?

Not to pick on Conservative ethics, IMHO all parties are just as unethical, the Harper conservatives are just particularly competent at being unethical.

“Poloz said a combination of low demand and [low] investment, and high savings that have been directed to less productive uses such as housing, may keep growth well below normal levels over a long period and mean low interest rates could prove to be less stimulative than in the past”.

That is what I said the other day here, about savings must go to business investment, not to government making pension promises (Ont.K.Wynne 2017 pension), and not housing, or else there is no productive growth. We will be poorer like from communism.

Garth Quote March 2014:
And now Poloz has been forced to utter more words of defeat. When asked if he rules out the possibility of having to cut rates further, even though it will create more debt and ultimately more trouble, he said: “If the balance of risks were to shift so that the risks on the downside for inflation were increased, then we would need to reconsider.”

(Learn how these central banks think. They think 2% inflation is stimulative, without proof. It is not stimulative. It causes malinvestment, like house speculation.)

#97 Smoking Man on 02.26.15 at 11:03 pm
You guys all remember I got another dog a few months ago.. Wyatt.
Nobody wanted him, he had crazy smoking man eyes, I loved him second I saw him, even though I knew he was a bit artistic.
So he’s kind of like the retarded pug I was watching in the summer.
He spins in circles before he goes number 2.. He still having problems between out side and inside.
So now I move my hand in circles hoping he spins and dose it out side.
Oh man, he thinks it a trick now, he just spins.
So I’m out having a smoke and sneaking a few shots of JD. While trying to get him to go.
I do the spin motion with my hand. he spins and nothing…
So I squat down pretending to do the deed with grunting sounds and all..
Seconds later he goes.
It worked… It’s a miracle.. My crazy beauty dog will not crap in my house tonight.
Just hope my nabours never saw what I did.
____________________________________________

So what if your neighbors saw what you did! Tell them to go @#%%#$% themselves. What you do on your own property is your business. I would give $1000 bucks to see that photo posted here though!
By the way Smoking Man pugs are dogs they are little RAT barking machines that are merely a snack for coyotes. Tell who ever parks the pug at your place to get a real dog! One that stands up when it pees!

Garth, you’ve often said, “The Govt does not set rates” and yet, today’s post is all about how Poloz’s move juiced the market.

Sure, you can distinguish fixed rates vs variable rates. Or that BoC is not really the “Govt”. But c’mon, BoC is hardly independent of the Govt, either. And fixed-vs-variable is mere semantics when the BoC move has such a visible/strong influence on the housing market.

It begs the question, where did the aliens come from? Other previous aliens of course! So where did those aliens come from? Don’t you understand it is aliens all the way down!

Just a modern update of this:http://en.wikipedia.org/wiki/Turtles_all_the_way_down
_____________________________________________
Even Aliens believe in an afterlife! I think this fits in with Smoking Mans beliefs.
According to legend, Kortar, the “first” Klingon, and his mate were created in a place called QI’tu’. The two destroyed the gods who made them and turned the heavens into ashes. This event is recounted in marriage ceremonies through the following, singular passage: “With fire and steel did the gods forge the Klingon heart. So fiercely did it beat, so loud was the sound, that the gods cried out, ‘On this day we have brought forth the strongest heart in all the heavens. None can stand before it without trembling at its strength.’ But then the Klingon heart weakened, its steady rhythm faltered and the gods said, ‘Why do you weaken so? We have made you the strongest in all of creation.’ And the heart said… ‘I am alone.’ And the gods knew that they had erred. So they went back to their forge and brought forth another heart. But the second heart beat stronger than the first, and the first was jealous of its power. Fortunately, the second heart was tempered by wisdom. ‘If we join together, no force can stop us.’ And when the two hearts began to beat together, they filled the heavens with a terrible sound. For the first time, the gods knew fear. They tried to flee, but it was too late. The Klingon hearts destroyed the gods who created them and turned the heavens to ashes. To this very day, no one can oppose the beating of two Klingon hearts.”https://www.youtube.com/watch?v=m0yVUaL9CWs

This recent drop in the dollar over the last year is going to be the undoing of this economy. Everyone of the tree hugging, lefty socialist union kissing dumb asses, pegs their livelihood on a low Canadian dollar so they can keep their overinflated paychecks going at the companies that export. Well people wake up! Now all of that stuff can be made in some half-baked tin-pot nation where they don’t give two $hits about unions or for that matter healthcare, sanitation, or human rights. They will build our crap cheaper and as the idiots we are, will still purchase it. So thanks everyone for messing up our dollar!

Further to my above post Garth, I just mentioned this about a month ago that there are consequences for the cheapo Canadian dollar. Oh how we are going to pay! Just go to the grocery store people. Purchase some fresh produce lately? What about that new car? Get ready for an increase in$$. This low Canadian dollar mentality pisses me off. What a bunch of morons………….
That’s it rant over.

To those haranguing about the fact that Canada is a net exporter of electricity, that’s true. But we import plenty from them as well- about half as much as we export. Our exports tend to be surplus electricity from huge baseload generation (hydro in B.C. and Quebec, nuclear in Ontario), and our imports tend to be electricity to meet peak demand at high-consumption times. Of course a falling loonie will make electricity more expensive.

My wife just returned from food shopping. She tries never to buy anything at regular prices, and buys when on sale. She bought some lovely romaine which was cheaper than it has been for the last few weeks. She has not noticed any blanket increase in food prices. Masking any inflation so far are seasonal variations, which range widely from week to week. Green onions were cheaper than last week. In a few months I can start growing my own salad greens anyway. And its great living in the greenhouse capital of Canada. Lots of locally grown produce in a couple of months. Local growers export millions to the U.S. BTW, our avocados here rarely come from the U.S., usually Mexico or Latin American countries. Life is good!

Garth, some time ago (early 2013) you said sell Canada and buy USA, which was a great advice. At that time rate was about 1 buck CAD for 1 buck USD. US stock market (dow) was about 13500. Today our rates are 0.80 CAD = 1 USD and stock market (dow) is about 18000.

Wouldn’t it be the time to sell USA to buy Canada (or Europe) or something ?

————————

No.

It’s time for you to stick to your asset allocation and rebalance accordingly. Market timing is a zero-sum game you are most likely to lose.

You know realtors in Ontario are getting nervous when you see a description like the following on a listing in Oakville:

“Why Would Bc General Contractors Love This House (And Be Willing To Pay More For It?) In Bc, Corners Are Preferred. This 1960’S Built, 3 Bedroom, 2 Bath Bungalow Is An Approximately 1,000 Sq Ft Home On A 65′ X 115′ 7,500Sqft Inside Corner Lot. The Home Was Updated And Remodeled In The 80S And Has Been Well Kept And Maintained. This Is Great Home For The 5 R’s. Reside,Rent,Remodel,Renovate,Rebuild?”

#45 Crowdsourcing Garth,
Garth doesn’t want to drop the blueprint because then people will claim he’s biassed or has an interest in pushing people into certain stocks or ETFs. Worse, if people lose money then they’ll blame him. But in the interest of helping you out I will offer you this as an example to start with. You should do your own research and come to your own conclusions:

You can toss in some XRE (REIT ETF paying 4.6%) and XPF (preffered shares ETF paying 5%) for good measure.

Again, this is ONLY a starting point and these are not the only ETFs out there and may not even be the best ones. That’s up to you to decide. The percentages are also only rough starting points and you need to decide what weighting you want.

Would it be better to place the bond portion of the balanced portfolio into the taxable account, for the time being?

If rates rise, I would be able to claim a capital loss on these bonds, by selling by the end of 2015, and adding same bonds into RSP. (The allocation % of bonds will stay the same through the entire operation)

Report from Mississauga. Home (Semi ~ 1700sf) near mine just sold for ~ 16k over asking. (Sold for $535k.) It was a 9 out of 10 and staged beautifully. Walk to Go Train (15 min), Walk to Go Bus Stop(4min), Walk to City Bus Stop (1 min). Food stores, ramp to 401 and 407 near by.

Location, Condition and Staging….and presto…over asking sale. Not to mention a tight market in Mississauga.

He’s only got one knob to twist. It was obvious to everyone who cared to look that Ontario’s manufacturing wasn’t competitive with a 90 cent dollar, and the owners of those plants weren’t doing much to change it. AB, SK and NL could carry the country with $100 oil, but not at $50.

Consumers, in debt to the tune of 160% of a year’s wages, just kept leasing those Mercedes and buying those fresh Chilean grapes. We borrow from abroad to pay for it all. They figure we’re good for it.

Everyday oil is under $60 spells economic ruin for Alberta…. Under $50 like it is now and we’ll Alberta becomes the next detroit in a few year with RE worth no more then $50k. To think after just four months of low oil prices Alberta is in a world of financial hurt will all that oil money gone all thanks to the steal steal steal waste waste waste CONservatives. To think socialist Norway with high union rates and high union paying jobs still managed to save $830,000,000,000.00 or $830 billion dollars for those in Alberta who are weak minded to understand numbers. Alberta is a shining example of how conservatives are the most crooked party but the people of Alberta are not the sharpest pencils in the box. Good Job voting CON and you will pay dearly for it. Alberta is FINISHED

+++++++++++++++++++++++++++++++++++++

You sound like that lunatic that stands downtown in Calgary ranting about the government.

People blaming immigration for their problems is a practice as old as civilization itself. It rarely stems from logic, but rather from biases that we all suffer from. Some people can over ride those biases with logic, but many people can not.

Bias #1 – The human brain craves an easy answer. Sometimes the answer is very complex and sometimes the answer is partially or entirely unknown. Something bad is always happening. New immigrants are always showing up. Many people connect the two.

Bias #2 – Confirmation bias. It’s actually quite natural to mistrust anyone who looks or acts differently from you. Once a preconceived notion is established any evidence that backs it up is readily accepted by the brain. Any evidence to the contrary is easily dismissed.

Bias #3 – It is easier to accept evidence that is physically present and occurs in the present as opposed to abstract concepts that may occur in the past or future.

There are more, but these are the main three. Not coincidentally these are the same three biases that result in the anti-vaccination crowd and anti-climate change crowd. It’s actually quite difficult to change any of these group’s minds (racists, anti-vax people and anti-climate change). You just hope that by informing them of the natural biasses we all have that they can recognize their beliefs have no basis in logic and start to consider alternative views.

I know many think saving in GIC’s is not smart but most people don’t understand that saving little to nothing is much worse.

GIC’s if you shop around can still be found for 2.6%, 2.65%, 2.95%, 3.00% fixed rates.

It can be quite financially dangerous. CBC had a news item about the new, fastest growing debt in unsecured, installment loans.

These are charging as high as 57% interest per year just under the legal annual interest rate and many make it worse by getting insurance on this debt which can make this as high as costing 120% of the debt per year.

Don’t forget about auto loans, personal loans, consumer loans, credit card debt that can be 20% to 38% as well.

Many fall in difficult life circumstances that they could not control.

This is what happens when interest rates for the majority of borrowers in the economy get used to cheap debt just piling it on and thinking that it is going to be okay.

I’m work in Supply Chain in Edmonton. Things are really starting to change here in Edmonton. Eecol was a ghost town when I was in there last week. And Rarely do you you ever get sales people cold calling you. Maybe a couple of people each quarter that you occasionally do business with. The last couple weeks it’s almost daily from companies we’ve never dealt with before.

As well, many companies are calling up to check on status of payments even a couple of days before they’re due. That never happens. They might call after it being 30+ days late. Not sure if they’re strapped for cash, or if they’re worried we are and possibly unable to pay our bills?Either way, the business environment is changing here in Edmonton, and more so than just everyone talking about layoffs.

I agree that saving something in a GIC is better than saving nothing … but most of those “higher rate” GICs are locked in. GICs are bad per se, but you give up a lot of return for marginally extra “safety”. You are still better off by investing in a Government Bond ETF. They pay more, are instantly liquid and offer very little risk (unless you think Canada is going to default on its loans any time soon).

Also, some people are so risk averse that they plunk ALL of their money into such GICs. There’s nothing wrong with putting a good chunk of your money in fixed income, but 100% is unnecessary. Unless of course your plan is to wait for a crash that you think is imminent and you plan to flip over to equities at the bottom, but that’s an entirely different type of risk that you’re taking.

He should drop rates lower so that we pay more for everything otherwise we will just wait for price to come down… this is what the mainsteam media are telling us.

I am now biking everywhere … don’t want to put gas in my car as it might be lower next week. and Oh, still haven’t bought my Iphone 4… the price just keeps on dropping. Might be cheaper next year so I will wait a bit more

My sister hates debt and paid off her modest $235,000 house bought back in 2000 and paid off in 2010.

It was last valued at $427,000 on December-21-2014.

She is really debt averse. She has no debts, credit cards, auto loans, mortgage etc.

She has managed to save $125,000 in the last 5 years, $40,000 TFSA’s, $100,000 RRSP’s, $25,000 GIC’s.

She makes sure that she saves and put aside $1,500 a month.

She puts all her money in GIC’s, 90% fixed, 10% liquid, cashable. It is all that she feels comfortable with.
75% of her net worth is in one asset and she has no growth on the rest. Unwise. By avoiding risk she may risk running out of money. — Garth

Ssssshhh. I’m hoping to move to Vancouver at some point during the year. These interest rate will hopefully spur some renters to vacate their apartments so I can snag something that isn’t a cramped craphole. Maybe you could hold off trying to convince Vancouverites to get their crap together until after I move?

Yesterday, Tim asked about protecting his mother’s $700,000 nest egg from taxes. If his mother is 71 the RRSP must be converted to a RIF. In the year she turns 72 and all subsequent years, until age 90 or 91, a predetermined percentage must be withdrawn. By age 90 or 91 there would be no money left in the RIF.

She will pay taxes on the withdrawals, probably at a low tax rate, and she can gift the money to children or grandchildren every year if she wants to.

Not exactly correct. The RRIF payment will be a minimum of 7.4% in the first year – which is $51,800 added to her existing income. If that is just CPP and OAS (about $1,400 a month), her taxable income jumps to $68,600. In Ontario (for example) that means $15,000 in tax and a 21% tax rate with a 31% marginal rate. Every successive year her income will rise as RRIF payments are forced higher. — Garth

Hey Russ @192 ,even though the link was not intended for me I read the couch potato link and I found some of the results to be surprising .
Sometimes I feel like I’m to conservative with my investments considering at 40 my likely retirement is 25 /30 years away.
I think human physiology is set to the mindset the harder you work for the money ,the less risk you want to take with it.

Meanwhile, the stories of financial anguish caused by NAB financial planners keep emerging. And now the Australian Prudential Regulation Authority has signalled that it is watching the NAB situation – along with the wider industry.

The leaked documents at NAB shine a light on multiple problems within NAB wealth. The bank whistleblower describes a toxic culture of profit before all else. One former employee – one of many who contacted Fairfax Media this week – said: “I worked at NAB financial planning and witnessed pretty much word for word the same events that happened at CBA, except there were no whistleblowers – until now”….He told of one senior financial planner who pumped all his clients into geared managed funds – “regardless of risk profile” and pillaged them with fees.”The bullying, threats, affairs, staff churn, [are] another story,” he says.”When it all went pear shaped he was caught forging signatures to use branch accounts to cover margin calls … I watched management do everything they could to cover the tracks of their star.

Why do Albertans bother with that whole pesky election thingy. Waste of money, get a brick. put it on a podium. Call it the leader of the Alberta Conservative Party. Acclaim it. Done! save several million …………status quo preserved. The unbroken 100 yr legacy is intact.

Consumer proposals spiked in bankrupt Alberta. Not only are the COnservatives fiscally irresponsible and useless but we learn the conservative voters are just as fiscally irresponsible . The people of Alberta are simply to uneducated , irresponsible and backwards thinking to be allowed to vote. They have bankrupted Alberta and themselves plus ruined Canada in the process. The economic depression that Alberta faces will be fun to watch . Good job Alberta. OH yeah another US oil company pulls out. Alberta is FINISHED.

cowtown cowboy on 02.27.15 at 1:00 pm
37 Alberta is FINISHED on 02.26.15 at 8:19 pm

Everyday oil is under $60 spells economic ruin for Alberta…. Under $50 like it is now and we’ll Alberta becomes the next detroit in a few year with RE worth no more then $50k. To think after just four months of low oil prices Alberta is in a world of financial hurt will all that oil money gone all thanks to the steal steal steal waste waste waste CONservatives. To think socialist Norway with high union rates and high union paying jobs still managed to save $830,000,000,000.00 or $830 billion dollars for those in Alberta who are weak minded to understand numbers. Alberta is a shining example of how conservatives are the most crooked party but the people of Alberta are not the sharpest pencils in the box. Good Job voting CON and you will pay dearly for it. Alberta is FINISHED

+++++++++++++++++++++++++++++++++++++

You sound like that lunatic that stands downtown in Calgary ranting about the government.

Find another windmill and get lost you commie pinko nutter

____________________________________

Some of the dumbest and most backwards thinking people I met were from Alberta. Maybe it’s the rampant mad cow that’s destroying their minds? You can’t handle facts or reality. Your CON buddies just screwed you and all I am doing is pointing out reality which you feeble mind can’t handle. The fact is socialist Norway with high unions rates and high union pay managed to save $830,000,000,000.00 . It’s a number you will never understand. Go vote CON and enjoy your economic depression. Btw consumer proposals have spiked in Alberta. LOL

#206 Ray Vasquez — “I would say that compared to most Canadians, being debt free and being worth almost $600,000 at 35 is pretty good. […] Being worth $2,500,000 to $3,000,000 in 30 to 35 years is not unreasonable the way she is saving”

She sounds like she is doing quite well for her age. It’s really too bad about her investment plan, though. With a more reasonable one, she could retire ten years earlier, or be able to spend more on her desires now and still retire with plenty, or have a substantial legacy to give to charity or what have you. As it is, she earns very little interest on her savings, and has to share much of it with the taxman, all while the gnomes of inflation continue to gnaw away at her pile (except the house). $3,000,000 sounds like a lot, but in thirty years it’ll be worth what $1,500,000 is worth today, best case. Maybe less.

Your sister sounds like a great saver, but risk averse. Part of risk aversion is a lack of knowledge, or lack of ability to control the outcome.

I think Garth’s main point here is that you take risks in life whether you choose to or not. Even by “avoiding” risk by keeping all of your money in a GIC you are risking that inflation will errode your purchasing power to the point where all of your hard earned savings don’t buy you much in the future. It’s better to learn how the markets work and maintain a balanced portfolio. Even if you’re risk averse you can say go 50-50 (fixed income vs equity) and keep a bit of a cash reserve on top of that.

The biggest factor to managing risk is not taking on too much debt. Your sister has no debt so all the more reason to allow a small amount of risk on her “savings”.

Back in 2002 I was in between a jobs, so i took one part-time job and on occasion i would picked up some odd easy jobs just to meet and new people and maybe get some potential new customers for my small business that i run back then.
so one day i went to now famous Oakville to one of those odd jobs. Gentlemen asked me to run a phone cable from buildings office to laundry room for prepaid laundry machines card, he had one idea of running a cable i had something more simple, effective and cheaper on my mind. after 15min talk I sow that i was going nowhere so i did told a guy if you let me doit my way ill charge you bit less of what we agreed, after i sad that guy was so excited he almost sh!t his pants, so he let me doit my way, needles to say took me minutes to complete the job. easiest money I ever made working!

So what prozac did with his interest rate mumbo jumbo is that he anchored with option, he showed us we will suffer is if dollar stay strong, and that we will also suffer if dollar stays low for extended period of time. now we are successfully conditioned for what is coming.
Interesting read
anchoring effect, how technology is used to create anchoring effect and make us pay more.http://goo.gl/9PGa1i

#207 Ray Vasquez on 02.27.15 at 4:33 pm
Believe me, there are much worse things that can happen to 30 year olds.

Hardly relevant. Being fearful of the future is not something that should plague the young. — Garth
………
Fear
Guess it depends on you’re up brining.
My kid just handed in his resignation note to the boss Man this afternoon.

…”Four of the six people said by police to have pulled off the fraud are now dead. One had a fatal heart attack. A second fell from his balcony. The third plummeted out of a penthouse window.The fourth was Sergei Magnitsky.
===============

“Mostly our main clientele is from mainland China and they arrive on a Tuesday and leave on a Friday and in that time we go through from architecture to interior completely and then they go away and come back six months later.”

#225 aaron — “Are we just throwing numbers around? Why not 2M while we are at it.”

30 years at 2% inflation shrinks a dollar to 54 cents, and 35 years shrinks it to 49 cents. So if you believe that the BoC will consistently succeed in its 2% inflation target, $3mm will have the purchasing power of $1.5mm. I suppose I should have shown my work in the original post.

– The Loonie was already falling against the US-Dollar BEFORE Poloz dropped interest rates.
– The USD was already rising, NOT only against the CAD but also the BRL, EUR, AUD & NZD. So, it was not the CAD falling but the USD was rising. And a rising USD is the most bearish sign for the world economy. Remember what happened in the 2nd half of 2008 ?

During my travels in Thailand I struck up a conversation with a British bloke who called our previous head dude of the Bank of Canada as being Mark Carnage. It appears Stephen Poloz is no better at managing our country’s monetary policy. Speaking of Thailand, I have about 1800 Baht left over from the trip. My first thoughts were to cash it in right away at a currency exchange place. On second thought, given the direction our dollar is headed I’ll hold onto in longer because in the future it will be worth more than now.

but the two lists of interest rates he provides indicate the rates start low and increase with increasing time horizon. He seems to be contradicting his definition of “inversion” and his argument about determining whether Canada is already in recession. What’s he talking about? Am I missing something? I’m confused.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.